The Australian regulator warned investors against working with unlicensed exchanges/firmsThe Australian Securities and Investments Commission (ASIC) urged be careful of investing in financial products related to cryptocurrencies and not to work with unregistered companies. The regulator said it has received reports of users of such platforms who have suffered "significant losses".
Warning: Trading crypto-asset related financial products through unlicensed entities
18 August 2021
ASIC urges Australians to be wary of investing in crypto-asset related financial products, such as options and futures, through unlicensed entities By dealing with a licensed entity, you have certain investor protections Check if the entity you are dealing with holds an Australian financial services (AFS) licence or an Australian market licence (AML) online trading retail trader uses phone for crypto trading Be wary of entities or platforms unlicensed to offer financial products ASIC urges Australians to be wary of investing in crypto-asset related financial products and services where the provider does not hold an AFS licence or an AML.
An entity is required to be licensed by ASIC if they provide financial services (such as advising or dealing) in relation to financial products offered in Australia. Financial products include derivatives such as options, futures, leveraged tokens and binary options. The sale of binary options to retail clients was recently banned in Australia under an order that will remain in force for 18 months, after which it may be extended or made permanent. ASIC has received a number of reports from Australians who have used unlicensed platforms to trade crypto-asset related financial products, such as options and futures, and have experienced significant losses due to excessive leverage, platform outages, or unfair liquidations.
ASIC understands that some unlicensed overseas platforms are taking, or have already taken, steps to prevent Australian clients from accessing these financial products. These steps include removing references and links, placing additional warnings and disclosures on the relevant webpages and apps, and introducing geographically based IP restrictions (geo-blocking). This prevents more Australian consumers from accessing financial products provided by the unlicensed platform. Investor protections Licensed entities are subject to a regulatory framework that aims to maintain the integrity, quality and reputation of the Australian financial system. Dealing with licensed entities ensures that you have the benefit of specific obligations and investor protections imposed on these entities under the Corporations Act, that would not be applicable to an unlicensed provider. If an entity is unlicensed, you are taking a risk that you will not be afforded with the investor protections required of licensed providers.
Check before investing Check if the entity you are dealing with holds an AFSL or AML. Entities unlicensed by ASIC may also choose to register with an external dispute resolution scheme, such as the Australian Financial Complaints Authority, to enable investors to make a complaint. ASIC’s Moneysmart webpage on cryptocurrencies and ICOs also provides useful information on investing in crypto-assets. Listen to our podcast Our recent podcast on crypto-assets for first-time investors helps you understand the crypto space before investing.
Of course, we're not just talking about unlicensed firms, but primarily unlicensed exchanges. When you consider the number of user complaints from Australia after May 19, 2021 to Binance Australia casino - it is not surprising at all that there is such a warning from the Australian financial regulator.
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